BMBI Experts: the impact of Brexit on building markets (1 of 2)

The vote to leave Europe will inevitably be seen as a turning point for Britain. Now, the Builders Merchant Building Index, which is produced under the aegis of the BMF (Builders’ Merchant Federation) and accounts for 80% of the merchant industry’s sales, has asked six of its panel of industry leading Experts for their views on the short and longer term implications of Britain’s Brexit in their own markets.

[This is the first in a series of blogs on the subject. Please note that whilst the Experts here are members of the Construction Products Association (and John Sinfield is currently our Chairman), their views do not necessarily reflect the views of the CPA itself.]

So, we voted to Brexit! While our politicians indulge in Caesar-like back-stabbing, the Department of Energy & Climate Change (DECC), has ploughed on with key policy decisions including adopting the Fifth Carbon Budget. DECC even found time to push out a consultation on a new version of its current energy efficiency scheme.

Construction project planning is a long term game. Unless things become more predictable, building-in assumptions on a project’s cost of capital, the cost of imported goods and services, the cost of land or the cost of various currencies will be difficult. Pricing in that uncertainty to UK projects would require the expensive addition of a hedge fund manager and currency speculator to the traditional team.

Anyone who thinks they can tell you today what this means for the country or construction is a fool, or selling something. We’re all going to have to manage through a period of uncertainty until markets and politicians settle; and we understand how this affects consumer confidence. Interesting times ahead…

Uncertainty, disruption and volatility were predicted if Britain voted leave, but few took leaving seriously. Now it’s happened, investors’ sentiment in building has plummeted. But we need to push on.

The Repair Maintenance & Improvement (RMI) market is vital for roof window sales and important to builders’ merchants. Homeowners need confidence to take out loans for their extension or loft conversion. Lower interest rates should boost confidence, but roof windows are produced in Europe so the weakened pound could increase prices in Euro if it continues longer term.

The bulk of the market marches on regardless of short term sentiment, but the industry needs stability, and it will be disappointing if we lose momentum. We need decisive Government action to limit the economic shock. Actions should include a commitment to build more homes, and encouraging businesses to invest in construction projects.

A well-voiced shortage of skilled labour was already restricting construction. Government please note: construction is vital for the economy and relies heavily on the free movement of people.

We can’t turn back the clock. The decision is made. We need to move forward and seek new opportunities.

Was the country heading for recession anyway? Will the Bank of England’s action soften the landing? It’s difficult to calculate the impact of uncertainty and turmoil. Weaker sterling will increase raw material prices, but we will see growth in exports.

It’s almost impossible to factor in the effects of knee-jerk decisions, panic or delayed reaction among politicians and investors spooked by the media.

EU ‘migrants’ make up 25% of our work force. It’s important that migrants already here know there are no plans to change their status. Britain values their contribution.

We transformed our own business several times this half century, and saw through the 2008 financial crisis and other economic upheavals. Equally, robustly we’ll see this through. We are highly focused and strong. It’s business as usual.